S&P upgrades Western Digital to BBB-; outlook stable

S&P upgrades Western Digital to BBB-; outlook stable

S&P Global Upgrades Western Digital’s Credit Rating to ‘BB+’; Outlook Remains Stable

S&P Global Ratings has upgraded Western Digital Corp. (NASDAQ: WDC)’s corporate credit rating to ‘BB+’ from ‘BB’, reflecting improved financial flexibility following the Sandisk spinoff and a stronger outlook for deleveraging. The stable outlook underscores confidence in the company’s revised capital structure and conservative financial policies as a standalone entity.

The spinoff, expected to close later this month, will provide Western Digital with approximately $600 million in cash and a 19.9% stake in Sandisk, which the company plans to monetize to reduce debt within the next year. Combined with its $2.3 billion cash balance as of December 31, 2025, and projected fiscal 2025 EBITDA margins exceeding 25%, the firm is positioned to lower its net leverage ratio to under 2.0x by fiscal 2025, down from 6.4x in fiscal 2024. Management has committed to maintaining net leverage between 1.0x and 1.5x, with shareholder returns prioritized only after achieving this target.

The rating upgrade also reflects S&P’s expectations for sustained growth in hard disk drive (HDD) demand. Western Digital reported an 80% revenue increase in its HDD business during the first half of fiscal 2025, reversing a 31% decline in fiscal 2024. Segment gross margins have rebounded to over 38% in recent quarters, driven by improved pricing and cost discipline.

However, S&P noted ongoing risks tied to the HDD industry’s reliance on capital spending by large cloud providers. Fluctuations in production volumes or market demand could impact cash flow and credit metrics. The firm’s free cash flow to debt is projected to exceed 30% in fiscal 2026, enhancing its resilience to industry cycles.

S&P affirmed its ‘BBB-’ rating on Western Digital’s senior secured debt and raised its unsecured debt rating to ‘BB’. A downgrade could occur if HDD market conditions deteriorate, while continued leverage reduction and technological leadership may support further upgrades.

(https://www.investing.com/news/stock-market-news/western-digitals-credit-rating-rises-following-sandisk-spinoff-sp-global-93CH-3884302): Investing.com, February 2026.